I think Barozi nailed it.
The way I see it, Japanese devs as a whole were very, very good till the very beginning of the last generation, then at least to me, there was a very noticeable drop in quality this gen, especially from Square and Capcom.
After the Atari crash in the early 80s, the 'power', like Degausser called it, shifted from the West to Japan due to Nintendo with the NES, and it remained there till the last generation, which coincided with the release of the first Western console (the original Xbox) in a very long time, the mega success of the GTA franchise and the migration of PC developers to home consoles.
It´s good that we still get a few Japanese gems (like the 'Souls' games) and that Nintendo has improved their games this generation when compared to the last (imo).
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